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How China Walled Off the Internet

It was 2000, and Bill Clinton was upbeat. The internet, he said, was opening up the world.

“There’s no question China has been trying to crack down on the internet,” he said. “Good luck. That’s sort of like trying to nail Jell-O to the wall.”

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The internet would inevitably push China toward democracy, he said. How could any country control something so free-flowing and still hope to be technologically vibrant? Something would surely have to give.

How China Walled Off the Internet

Today, China has the world’s only internet companies that can match America’s in ambition and reach.

Booking

JD.com

$35 billion

$348 billion

$413 billion

$792 billion

market value

$402 billion

$743 billion

Salesforce

Baidu

$66 billion

Source: S&P Global Market Intelligence, as of Nov. 15.

$792 billion

market value

$743 billion

$348 billion

$413 billion

$402 billion

Booking

JD.com

$35 billion

Salesforce

Baidu

$66 billion

Source: S&P Global Market Intelligence, Nov. 15.

$413 billion

$792 billion

market value

$402 billion

$743 billion

Booking

JD.com

$35 billion

$348 billion

Salesforce

Baidu

$66 billion

Source: S&P Global Market Intelligence, as of Nov. 15.

It is years ahead of the United States in replacing paper money with smartphone payments, turning tech giants into vital gatekeepers of the consumer economy.

And it is host to a supernova of creative expression — in short videos, podcasts, blogs and streaming TV — that ought to dispel any notions of Chinese culture as drearily conformist.

‘Karma’s a Bitch,’ a meme

Earthworm

Liu Bubao

Big Lemon 🍋Carrie

All this, on a patch of cyberspace that is walled off from Facebook and Google, policed by tens of thousands of censors and subject to strict controls on how data is collected, stored and shared.

China’s leaders like the internet they have created. And now, they want to direct the nation’s talent and tech acumen toward an even loftier end: building an innovation-driven economy, one that produces world-leading companies.

Not long ago, Chinese tech firms were best known for copying Silicon Valley.

Google

Baidu

YouTube

Youku

Instagram

Douyin

Uber

Didi

But the flow of inspiration now runs both ways. American social media executives look to Tencent and ByteDance for the latest tricks for keeping users glued to their phones.

Tencent’s WeChat app, an all-in-one hub for socializing, playing games, paying bills, booking train tickets and more, paved the way for the increasingly feature-stuffed chat apps made by Facebook and Apple. Facebook recently took a page from TikTok, a Chinese service that is a sensation among Western tweens, by releasing its own highly similar app for creating goofy short videos.

If people in the West didn’t see this coming, it was because they mistook China’s authoritarianism for hostility toward technology.

But in some ways Chinese tech firms are less fettered than American ones. Witness the backlash against Big Data in the United States, the calls to break up giants like Facebook and the anxiety about digital addiction. None of those are big problems for Chinese companies.

In China, there is pretty much only one rule, and it is simple: Don’t undermine the state.

So titans like Weibo and Baidu heed censorship orders. Unwanted beliefs and ideologies are kept out.

Beyond that, everything is fair game. Start-ups can achieve mammoth scale with astonishing speed; they can also crash brutally. Thanks to weak intellectual property protections, they can rip one another off with abandon — not great for rewarding innovation, but O.K. for consumers, who get lots of choices.

And the money just keeps flowing in.

$25 billion

United States

20

15

China

10

5

2010

2011

2012

2013

2014

2015

2016

2017

’18

$25 billion

United States

20

15

China

10

5

’10

’11

’12

’13

’14

’15

’16

’17

’18

$25 billion

United States

20

15

China

10

5

2010

2011

2012

2013

2014

2015

2016

2017

’18

Venture capital invested each quarter. Source: KPMG Enterprise

In another advantage, old-school industries like media, finance and health care have been dominated by lumbering state-run giants. That has allowed internet champions like Alibaba and Tencent to sew themselves into these businesses with ease.

With their mobile payment platforms, the two giants have built sprawling ecosystems in which vast amounts of commercial activity now take place. Little remains of daily life that has not been transformed. Shopping. Getting a loan. Renting a bike. Even going to the doctor.

This level of clout hasn’t gone unnoticed by China’s leaders. Never in the Communist era have private entities wielded such influence over people’s lives.

To keep tech in its place, the government is demanding stakes in companies and influence over management. Regulators have reprimanded online platforms for hosting content they deem distasteful — too raunchy, too flirty, too creepy or just too weird.

That’s why the best way for tech companies to thrive in China is to make themselves useful to the state. Nearly everyone in China uses WeChat, making the social network a great way for the authorities to police what people say and do. SenseTime, whose facial recognition technology powers those fun filters in video apps, also sells software to law enforcement.

Image recognition software by SenseTime

Crowd analysis software by SenseTime

Identification software by SenseTime labeling people and cars in real time

Participants at a Chinese internet conference identified by Face++ software

The risk for these companies is that the government demands more, sucking away resources that could be better spent chasing innovations or breaking into new markets.

In China, says Lance Noble of the research firm Gavekal Dragonomics, the government’s support “can be a blessing and a curse.”